Alarms Go Off for Medicare Part D: Did Trump raise the cost of Medicare Part D or Did Something Else happen?

‍ By now you have seen hundreds if not thousands of articles with dramatic headlines warning you about the drastic changes coming to Medicare Part D coverage. So, today I will be explaining what exactly happened, how it could affect you, and what steps you can take to get ahead of this change.

So, what happened?

To understand what happened we must go back about 4 years ago to 2022. That year under the Biden administration they passed the Inflation Reduction Act (IRA) and Medicare Part D had one of its biggest changes in its history. This law made sweeping changes to Part D coverage but the most important one for this article is that it established a limit or cap of out-of-pocket expenses for Part D coverage. Prior to this change Part D coverage had several phases such as the deductible phase, initial coverage phase, coverage gap phase, and catastrophic phase. When people would transition through these phases throughout the year they would experience massive swings in the costs of their medication. Well, the IRA got rid of the coverage gap phase and made changes to the catastrophic phase. In 2025, Medicare introduced a $2,000 annual out-of-pocket cap on Part D drug expenses. Once beneficiaries reached this limit, they entered the catastrophic phase and owed $0 for covered medications—shifting the financial burden from seniors to insurance companies.

As we all know, far too well insurance companies operate to earn a profit so, the most predictable outcome of this change would be that the insurance companies would raise prices to compensate for the added costs. To avoid a sudden increase in the cost of a Part D plans CMS implemented a temporary demonstration program that provided subsidies to offset the rise in costs for Part D sponsors. The Kaiser Family Foundation described how the demonstration functioned, “the demonstration provided subsidies to Part D plan sponsors, in two ways – reducing the base beneficiary premium and capping the year-over-year increase in the monthly premium. In 2025, the demonstration’s first year, the base beneficiary premium was reduced by $15, and the monthly premium increase was limited to $35. For 2026, these parameters were scaled back, with a base premium reduction of $10 and a maximum allowable premium increase of $50.”[1] The program was initially scheduled to run until 2027, but CMS decided to end the demonstration this year on the belief that Part D Sponsors should have enough information to adjust Part D premiums in a way that Medicare beneficiaries could handle.

To summarize what happened, CMS decided to end a temporary demonstration program that capped the base premium for a Part D plan and limited the amount a Part D plan could raise its price year over year.

How can this affect you.

The simplest way the end of this program could affect you is that you will pay more for your Part D coverage. Another way this could affect you is it could cause plans to exit markets or change their formularies. The end of this program will mainly affect people on standalone Part D plans with either Original Medicare or Original Medicare with a supplement plan.

What about the more than 50% of Medicare Beneficiaries who have a Medicare Advantage Plan with Part D coverage? Here is where things get a bit nuanced Medicare Advantage plans have access to rebates to offset the costs of Part D coverage. The Kaiser Family Foundation illustrates how this works, “The Medicare Advantage (MA) payment system gives MA-PD sponsors a distinct edge over standalone Part D plans (PDPs) by allowing them to use federal "rebate" funds to subsidize drug coverage to eliminate Part D premiums, lower deductibles, and enhance benefits.”[2] Standalone Part D plans do not have this advantage which is why people in those types of plans will face the most of the costs with this program ending.

What can you do?

The million-dollar questions, what can you do to prepare? The straightforward answer would be to begin to budget for a higher Part D premium. CMS Administrator Dr. Mehmet Oz has said that “premiums are projected to only rise $10 per month” with the end of the program. That would equate to an extra $120 per year for Part D coverage. Time will tell if that is true or not.

Another option for maneuvering this change would be to apply for programs that could help offset the rise in costs for Part D coverage. You could look into the requirements for Medicaid, Extra Help (Low Income Subsidy), and talk to your state’s State Pharmaceutical Assistance Programs (SPAPs). All these programs have different eligibility requirements so even if you don’t qualify for one that does not mean you can’t qualify for another.

Lastly, you want too shop around during this year’s Annual Enrollment Period (AEP) which takes place from October 15th – December 7th. You have several options to shop around, you could call your Medicare Insurance broker if you have one or reach out to one (our team would be glad to help you!), visit Medicare.gov, call 1-800-Medicare, or contact your State Health Insurance Assistance Program (SHIP) office.

To recap CMS ended a temporary demonstration program earlier than expected and this could cause the premium for a Part D to rise. People on standalone Part D Plans will feel this change the most. Some great steps you can take to manage this are budget for a higher premium, apply for all available programs, and make sure to shop around during AEP.

Thank you so much for reading, if you need any help navigating this, please fill out a contact form and one of our fantastic team members will get in touch with you!

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[1] https://www.kff.org/quick-insights/cmss-decision-to-end-temporary-subsidies-to-medicares-stand-alone-drug-plans-could-mean-larger-premium-increases-for-some-beneficiaries-next-year/

[2] https://www.kff.org/medicare/how-medicare-advantage-rebates-disadvantage-medicares-stand-alone-drug-plan-market/